>The private bank would lose 1 cent, as you mentioned Sorry if it wasn't clear. The bank would rather deny the loan than lose a penny on the dollar (in expecta

>The private bank would lose 1 cent, as you mentioned Sorry if it wasn't clear. The bank would rather deny the loan than lose a penny on the dollar (in expectation). The government would rather approve the loan, since it makes 19 cents on the dollar once you count taxable revenue. The private-banking counterfactual has the bank essentially remove 20 cents of taxable revenue from the government because they'll deny a loan rather than lose money on it.